This thesis is about the perceived fairness of compensation systems. In particular the focus in the thesis is on understanding judgments on fairness from an employee perspective and how these judgments are produced, but also how they are related with social relations between colleagues within the organization. The thesis discusses different ways of producing fairness judgments based on a distinction between rational based and non-rational based belief formation. Additionally, the thesis also argues that when one assesses the motivation produced by a compensation system, one should not neglect the social dimension and in particular the need for social relationships and its influence on individual motivation, fairness judgments, and the internal social environment of the organization.